Sunday, March 12, 2017

Blackstone City Backed by Fannie Mae

What if the federal government started a new town with 48,431 private equity owned homes. Uncle Sam would back the rent on 46,010 homes if times got tough. The private equity firm would be at risk for the rent on 2,421 homes. That's the case with Blackstone's Invitation Homes, only the homes are spread across the country.

Invitation Homes, the 2012 buy-to-rent creature of private-equity firm
Blackstone, and now owner of 48,431 single-family homes, thus the
largest landlord of single-family homes in the US, accomplished another
feat: it obtained government guarantees for $1 billion in rental-home
mortgage backed securities.

The government agency that has agreed to guarantee the “timely
payment of principal and interest” of these “Guaranteed Certificates,”
as they’re called, is Fannie Mae, one of the government-sponsored
entities (GSE) that has been bailed out and taken over by the government
during the Financial Crisis.

This is the first time ever that a government-sponsored enterprise
has guaranteed single-family rental-home mortgage-backed securities,
issued by a huge corporate landlord.

This is one Obama administration act that President Donald Trump won't undo or fire. Blacktown, a distributed modern Pottersville, lives thanks to our federal government's actions via Fannie Mae. It's not the first time Fannie Mae looked after the monied vs. the people they are charged with helping, potential low income home buyers.

by shaping "the company's books, not in response to accepted accounting
rules but in a way that made it appear that the company had reached
earnings targets, thus triggering the maximum possible payout for
executives."

Fannie Mae settled without admitting or denying guilt. Fannie Mae's board at the time the fraud started included Ken Duberstein, Stephen Friedman, Jamie Gorelick and James A. Johnson. Politicians Red and Blue love PEU.

Hugh Frater helped found Blackrock and its commercial real estate arm Anthracite Capital. When Frater's Antracite Capital got into financial trouble in early 2009 he jumped from the board of directors. Frater had another two years left in his board term when he exited Antracite. At the time Forbesstated:

Anthracite invests in high-yield (read: junk) bonds and loans that
finance commercial real estate. The company on Wednesday announced a
mammoth fourth-quarter loss, financial problems ranging from busted loan
covenants to unpaid margin calls, and a warning by its auditors that it
might not be long for the world.

Frater later went on to mortgage servicing giant Berkadia. A story on Frater's leadership noted Berkadia's significant status with Fannie Mae.

Last August, the Mortgage Bankers Association ranked Berkadia among the
industry leaders in a wide range of primary and master servicing
categories: third in overall loan portfolio ($184.2 billion), third in
Fannie Mae and Freddie Mac loans ($27 billion)...

One Fannie Mae board member had seen a company he founded implode from evaporating rents and declining commercial real estate asset valuations. Fannie Mae will prevent the same thing happening in the residential home rental market.

Hugh Frater also sits on Spearhead Capital's board. Their website describes Spearhead as "a boutique financial services firm exclusively focused on providing
customized solutions for ultra high net worth investors, family offices,
and asset management firms." What if they could steer their clients to tax free, risk free returns?

It appears another public service organization has been co-opted for the landed gentry.

Insider Architect of the Implosion

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